UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY  REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT
OF 1934 For the quarterly period ended September 30, 2005

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
EXCHANGE ACT OF 1934

               For the transition period from ________ to ________

                        Commission File Number 000-51006

                              HARBIN ELECTRIC, INC.

                 (Name of small business issuer in its charter)

                  Nevada                                 98-0403396
      (State or other jurisdiction             (IRS Employer Identification No.)
            of incorporation)

                   No. 9 Ha Ping Xi Lu, Ha Ping Lu Ji Zhong Qu
              Harbin Kai Fa Qu, Harbin, People's Republic of China
                                     150060
                    (Address of principal executive offices)

                                 86-451-86116757
                           (Issuer's telephone number)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange Act of 1934,  during the past 12 months
(or for such  shorter  period  that the  registrant  was  required  to file such
reports),  and (2) has been subject to such filing  requirements for the past 90
days. Yes [X] No [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section 12, 13 or 15(d) of the  Securities  Exchange  Act of 1934 after
the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of September 30, 2005: 15,000,451 shares of common stock,
par value $0.00001 per share



<PAGE>
                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                                     Page


<S>                                                                                                                   <C>
Item 1.  Financial Statements (Unaudited)..........................................................................   1

Consolidated Statements of Operations (Unaudited)..................................................................   1
   For the Three - Month Periods Ended September 30, 2005 and 2004.................................................   1
   For the Nine - Month Periods Ended September 30, 2005 and 2004..................................................   1

Consolidated Balance Sheet.........................................................................................   2
   As of September 30, 2005........................................................................................   2

Consolidated Statements of Cash Flows..............................................................................   3
   For the Nine Months Ended September  2005 and 2004..............................................................   3

Item 2.   Management's Discussion and Analysis or Plan of Operation................................................  15

Item 3.   Controls and Procedures..................................................................................  20

Part II.  Other Information........................................................................................  20

Item 6.   Exhibits.................................................................................................  20

Signatures.........................................................................................................  21

Index to Exhibits..................................................................................................  22

</TABLE>




<PAGE>
                          PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>


                                                          FOR THE THREE MONTH PERIODS ENDED     FOR THE NINE MONTH PERIODS ENDED
                                                         Sept. 30, 2005      Sept. 30, 2004     Sept. 30, 2005     Sept. 30, 2004
                                                         ----------------   -----------------  -----------------   ----------------
<S>                                                            <C>                <C>                <C>                 <C>
Net revenue..........................................    $     7,044,014    $      1,790,549   $     16,446,753    $  1,790,549.00

Cost of revenue......................................          3,665,271             657,289          8,263,351            657,289
                                                         ----------------   -----------------  -----------------   ----------------

Gross profit.........................................          3,378,743           1,133,260          8,183,402          1,133,260

Operating expenses
    Selling expenses.................................            100,923              62,501            225,256             62,501
    General and administrative expenses..............            302,586              38,762            696,587             80,074
                                                         ----------------   -----------------  -----------------   ----------------
         Total operating expenses....................            403,509             101,263            921,843            142,575
                                                         ----------------   -----------------  -----------------   ----------------

Income (loss) from operations........................    $     2,975,234    $      1,031,997   $      7,261,559    $       990,685

Non-operating Income
    Interest income..................................              8,810              10,370             22,928             10,370
                                                         ----------------   -----------------  -----------------   ----------------

Net income (loss)....................................          2,984,044           1,042,367          7,284,487          1,001,055

Other comprehensive loss
    unrealized loss on marketable securities.........            120,400                  --            (25,245)                --
                                                         ----------------   -----------------  -----------------   ----------------

Comprehensive Income (loss)..........................    $     3,104,444    $      1,042,367   $      7,259,242    $     1,001,055
                                                         ================   =================  =================   ================

Basic weighted average shares outstanding............         15,539,580           8,000,000         14,929,350          8,000,000

Basic net earnings per share.........................               0.19                0.13               0.49               0.13
                                                         ----------------   -----------------  -----------------   ----------------

Diluted weighted average shares outstanding..........         15,554,012           8,000,000         14,929,350          8,000,000

Diluted net earnings per share.......................               0.19                0.13               0.49               0.13
                                                         ----------------   -----------------  -----------------   ----------------
</TABLE>

                                       1
<PAGE>
                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                       AS OF
                                                                                SEPTEMBER 30, 2005
                                                                              ------------------------
<S>                                                                                      <C>
ASSETS

CURRENT ASSETS
    Cash & cash equivalents...............................................    $             5,604,096
    Accounts receivable, net..............................................                  3,914,248
    Inventory.............................................................                    764,713
    Advances to suppliers.................................................                  2,524,695
    Prepaid expenses......................................................                    141,485
    Marketable securities.................................................                    483,000
                                                                              ------------------------
         Total current assets.............................................
                                                                                           13,432,237

PROPERTY AND EQUIPMENT, net...............................................                 10,844,001

INTANGIBLE ASSETS, net....................................................                    564,271
                                                                              ------------------------

TOTAL ASSETS..............................................................    $            24,840,509
                                                                              ========================

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable......................................................    $               323,795
    Customer deposits.....................................................                      2,527
    Due to related parties................................................                     19,696
                                                                              ------------------------
         Total liabilities................................................
                                                                                              346,018

Minority Interest.........................................................                  1,218,000

STOCKHOLDERS' EQUITY
    Common stock, .00001 par value; authorized shares 100,000,000; issued
        and outstanding 15,000,451 shares.................................                        150
    Additional paid in capital............................................                 11,435,507
    Shares to be issued, 786,885 shares of common stock...................                  2,400,000
    Subscription receivable...............................................                   (125,859)
    Statutory reserves....................................................                  1,438,791
    Accumulated other comprehensive income................................                    (25,245)
    Retained earnings.....................................................                  8,153,147
                                                                              ------------------------
         Total stockholders' equity.......................................
                                                                                           23,276,491
                                                                              ------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $            24,840,509
                                                                              ========================
</TABLE>


         The accompanying notes are an integral part of these unaudited
                       consolidated financial statements.


                                       2
<PAGE>


                      HARBIN ELECTRIC, INC. & SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
          FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
<TABLE>
<CAPTION>


                                                                              FOR THE NINE          FOR THE NINE
                                                                             MONTH PERIODS          MONTH PERIODS
                                                                                 ENDED                  ENDED
                                                                           SEPTEMBER 30, 2005    SEPTEMBER 30, 2004
                                                                          ---------------------  --------------------

<S>                                                                                  <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net income.........................................................   $          7,284,487   $         1,001,055
    Adjustments to reconcile net income to net cash provided by (used
       in) operating activities:
         Depreciation..................................................                317,915                29,417
         Amortization..................................................                 14,924                    --
         Increase in current assets
              Accounts receivable......................................             (3,888,253)             (508,245)
              Inventory................................................               (495,409)              214,034)
              Advances to suppliers....................................             (2,468,746)             (104,782)
              Other assets.............................................                     --                  (974)
         Increase in current liabilities
              Accounts payable.........................................                326,322                    --
              Accrued expenses.........................................               (208,096)               96,478
                                                                          ---------------------  --------------------
    Net cash provided by (used in) operating activities................                883,144               298,915
                                                                          ---------------------  --------------------

CASH FLOWS FROM INVESTING ACTIVITIES
         Acquisition of intangible assets..............................              (266,200)                    --
         Acquisition of property & equipment...........................             (2,108,171)               (6,714)
                                                                          ---------------------  --------------------
    Net cash used in investing activities..............................             (2,374,371)               (6,714)
                                                                          ---------------------  --------------------

CASH FLOWS FROM FINANCING ACTIVITIES
         Loan from related parties.....................................                     --                11,387
         Advance from related parties..................................                 84,520                    --
         Cash received from shares.....................................              4,800,000                    --
         Issuance of subsidiary stock..................................                     --               434,291
                                                                          ---------------------  --------------------
    Net cash provided by financing activities..........................              4,884,520               445,678
                                                                          ---------------------  --------------------

NET INCREASE IN CASH & CASH EQUIVALENTS................................              3,393,293               737,879

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD...........................              2,210,803               309,260
                                                                          ---------------------  --------------------

CASH & CASH EQUIVALENTS, END OF PERIOD.................................             $5,604,096            $1,047,139
                                                                          =====================  ====================
</TABLE>


  The accompanying notes are an integral part of these unaudited consolidated
                             financial statements.



                                       3
<PAGE>


                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)

1.   ORGANIZATION AND DESCRIPTION OF BUSINESS

Harbin Tech Full Electric Co., Ltd. ("HTFE") was incorporated and formerly known
as Harbin Tech Full  Technology  Development  Co., Ltd.  ("HTFTD").  On July 12,
2004,  the Board of Directors  of HTFTD  approved to change the name of HTFTD to
Harbin Tech Full Electric Co., Ltd. HTFE is in the business of manufacturing and
marketing of linear motors and special electric  motors.  HTFE holds patents for
various commercial applications of linear motors.

Tech Full International,  Inc. ("TFI") was a Delaware corporation,  incorporated
on August 24, 2004. TFI was a non-operative holding company of HTFE.

On August 31, 2004, TFI entered into an agreement with all the  shareholders  of
HTFE to exchange  all of the  outstanding  stock of TFI for all the  outstanding
stock of HTFE. After the consummation of the agreement,  the former shareholders
of HTFE owned 1,500 shares of common  stock of TFI,  which  represented  100% of
TFI's issued and outstanding  shares. For U.S. Federal income tax purposes,  the
transaction is intended to be qualified as a tax-free  transaction under Section
351 of the Internal Revenue Code of 1986, as amended.

The  exchange  of  shares  between  TFI and the  shareholders  of HTFE  has been
accounted for as a reverse  acquisition  under the purchase method of accounting
since the  shareholders  of HTFE obtained  control of the  consolidated  entity.
Accordingly,   the  merger  of  the  two   companies  has  been  recorded  as  a
recapitalization  of HTFE, with HTFE being treated as the continuing entity. The
historical  financial  statements  presented are those of HTFE.  The  continuing
company  has  retained  December  31 as  its  fiscal  year  end.  The  financial
statements of the legal acquirer are not  significant;  therefore,  no pro forma
financial information is submitted.

On January 24, 2005, the TFI consummated a merger agreement with Torch Executive
Services  Ltd.  ("Torch"),  a  Nevada  corporation,  under  which  Torch  issued
8,000,000 shares of Torch to the shareholders of TFI, and under which TFI merged
into Torch Subsidiary,  Inc., a Delaware  corporation ("TSI") and an acquisition
subsidiary  of  Torch,  with TSI being the  surviving  entity.  As a part of the
merger,  Torch cancelled  5,000,000  shares of its issued and outstanding  stock
owned by its  former  president.  The  exchange  of shares  with  Torch has been
accounted for as a reverse  acquisition  under the purchase method of accounting
since the shareholders of TFI obtained control of Torch. Accordingly, the merger
of the two companies has been  recorded as a  recapitalization  of TFI, with TFI
being  treated as the  continuing  entity.  The  financial  statements  of legal
acquiree are not significant;  therefore,  no pro forma financial information is
submitted.

Torch was  incorporated  in the State of  Nevada  on July 9,  2003.  Torch was a
development  stage  company  in the  business  of  providing  luxury  travel and
concierge  services on a  personalized  one-to-one  basis as well as through the
internet.

As a part of the  merger,  Torch was  renamed  to  Harbin  Electric,  Inc.  (the
"Company") and the Company declared a stock dividend of 1.5 shares on each share
of its common stock outstanding for all shareholders on record as of January 26,
2005.

In connection with the  transactions  described  above,  the Company changed its
fiscal year end to December 31.

Joint Venture with Baldor Electric Company

On January  12,  2005,  HTFE  entered  into an  agreement  with Harbin Tech Full
Industry  Co., Ltd.  ("HTFI"),  pursuant to which HTFI agreed to transfer all of
its  interests in a joint  venture with Baldor  Electric  Company  ("Baldor") to

                                       4
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)

HTFE. In exchange for the transfer of the interests in the joint  venture,  HTFE
agreed to cause its publicly traded holding company to issue 1,000,000 shares of
Harbin  Electric,  Inc.'s  common stock to HTFI as a payment for the transfer of
the joint  venture  interests.  On May 11, 2005,  HTFE and the Company  signed a
written  consent  amending  the Share  Transfer  Agreement  whereby HTFE and the
Company  agreed that the  Company is to issue  786,885  shares of the  Company's
common  stock for the  transfer  of HTFE's  interest  in the joint  venture,  as
opposed to the  1,000,000  shares as set forth in the  original  Share  Transfer
Agreement  dated  January 12,  2005.  The  paid-in-capital  for the shares to be
issued in consideration for the interest in this joint venture is $2,400,000.

In accordance with the Joint Venture Agreement,  HTFI has a 65% equity ownership
in the joint venture and Baldor has the remaining  35%. HTFI will receive 55% of
the profits from the joint  venture with the  remainder of the profits  going to
Baldor.  The  Chief  Executive  Officer  and  Chairman  of the  Company  and the
Company's majority shareholder is also the principal owner of HTFI.

As of September 30, 2005, all operational revenues of the company have come from
HTFE and all operational  revenues rely on the  proprietary  technology and core
patents of HTFE.  The Harbin  Baldor Joint Venture has not generated any revenue
through  September  30,  2005.  HTFI  anticipates   entering  into  negotiations
regarding  the  termination  of the  Joint  Venture.  Total  assets in the joint
venture amounts to $3,618,000.

2.   BASIS OF PRESENTATION

The  accompanying  unaudited  financial  statements  of the  Company  have  been
prepared in accordance with generally accepted accounting principles for interim
financial information.  Accordingly,  they do not include all of the information
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments (consisting of normal
recurring  adjustments)  considered  necessary for a fair presentation have been
included.  Operating  results  for  the  interim  periods  are  not  necessarily
indicative of the results for any future period. These statements should be read
in conjunction with the Company's audited financial statements and notes thereto
for the fiscal year ended December 31, 2004.

Accounts Receivable

The  Company's  policy is to maintain  reserves for  potential  credit losses on
accounts  receivable.  Management reviews the composition of accounts receivable
and analyzes  historical bad debts,  customer  concentrations,  customer  credit
worthiness,  current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves.  The Company had accounts receivable of
$3,914,248 as of September 30, 2005. Based on historical collection activity, no
allowance is deemed necessary.

Advances to suppliers

The Company  advances  to certain  vendors for  purchase  of its  material.  The
advances to suppliers amounted to $2,524,695 at September 30, 2005.

Inventory

Inventory is mainly the raw material for  manufacturing  the  electrical  motor.
Inventory is valued at the lower of cost or market. The management  compares the
cost of inventory  with the market value and  allowance is made for writing down
the inventory to its market value, if lower.

                                       5
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)

Income Taxes

The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the  recognition of deferred tax assets and  liabilities for the expected future
tax  consequences of events that have been included in the financial  statements
or tax returns. Under this method,  deferred income taxes are recognized for the
tax consequences in future years of differences  between the tax bases of assets
and liabilities and their financial  reporting  amounts at each period end based
on enacted tax laws and statutory  tax rates  applicable to the periods in which
the differences are expected to affect taxable income.  Valuation allowances are
established,  when  necessary,  to reduce  deferred  tax  assets  to the  amount
expected to be realized.

According to the  Provisional  Regulations of the People's  Republic of China on
Income Tax,  the Document of  Reductions  and  Exemptions  of Income Tax for the
Company has been approved by the local tax bureau and the Management  Regulation
of Harbin Economic and Technological  Development Zone for the reporting period.
The Company is exempted from income tax from July 1, 2004 through June 30, 2006.

Fair value of financial instruments

Statement of Financial Accounting  Standards No. 107 ("SFAS 107"),  "Disclosures
about Fair Value of Financial  Instruments,"  requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts reported in
the statements of financial position for current assets and current  liabilities
qualifying as financial instruments are a reasonable estimate of fair value.

Foreign currency transactions and comprehensive income (loss)

Assets and  liabilities  in foreign  currency are recorded at the balance  sheet
date at the rate prevailing on that date. Items of income statement are recorded
at the average exchange rate. Gain or loss on foreign currency  transactions are
reflected  on  the  income  statement.  Gain  or  loss  on  financial  statement
translation  from foreign  currency are recorded as a separate  component in the
equity section of the balance sheet, as component of comprehensive  income.  The
functional currency of the Company is Chinese Renminbi.  Cumulative  translation
adjustment  amount was  insignificant  at and for the nine month  periods  ended
September 30, 2005 and 2004.

Segment Reporting

Statement of Financial  Accounting  Standards No. 131 ("SFAS 131"),  "Disclosure
about  Segments of an Enterprise and Related  Information,"  requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating  decisions and assessing  performance.  Reportable segments
are based on products  and  services,  geography,  legal  structure,  management
structure, or any other manner in which management disaggregates a company.

SFAS 131 has no effect on the Company's  financial  statements as  substantially
all of the  Company's  operations  are  conducted in one industry  segment.  The
Company  consists  of one  reportable  business  segment.  All  revenue  is from
customers in People's Republic of China. All of the Company's assets are located
in People's Republic of China.

                                       6
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)

Recent Pronouncements

On May 15, 2003,  the Financial  Accounting  Standards  Board (FASB) issued FASB
Statement No. 150 ("SFAS 150"),  "Accounting for Certain  Financial  Instruments
with  Characteristics  of Both  Liabilities  and  Equity."  SFAS 150 changes the
accounting for certain  financial  instruments  that,  under previous  guidance,
could be  classified as equity or  "mezzanine"  equity,  by now requiring  those
instruments to be classified as liabilities (or assets in some circumstances) in
the  statement  of financial  position.  Further,  SFAS 150 requires  disclosure
regarding the terms of those instruments and settlement  alternatives.  SFAS 150
affects an entity's classification of the following freestanding instruments: a)
Mandatorily  redeemable  instruments  b) Financial  instruments to repurchase an
entity's own equity instruments c) Financial  instruments  embodying obligations
that the issuer must or could  choose to settle by issuing a variable  number of
its shares or other  equity  instruments  based  solely on (i) a fixed  monetary
amount known at inception or (ii) something other than changes in its own equity
instruments  d) SFAS 150 does not  apply to  features  embedded  in a  financial
instrument that is not a derivative in its entirety. The guidance in SFAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003,  and is otherwise  effective at the beginning of the first interim
period  beginning  after  June  15,  2003.  For  private  companies,   mandatory
redeemable  financial  instruments are subject to the provisions of SFAS 150 for
the fiscal period beginning after December 15, 2003. The Company does not expect
the adoption of SFAS No. 150 to have a material impact on its financial position
or results of operations or cash flows.

In December 2003, FASB issued a revised Interpretation No. 46, "Consolidation of
Variable  Interest  Entities"  (FIN 46R).  FIN 46R  addresses  consolidation  by
business enterprises of variable interest entities and significantly changes the
consolidation   application  of  consolidation  policies  to  variable  interest
entities and, thus improves comparability between enterprises engaged in similar
activities  when  those  activities  are  conducted  through  variable  interest
entities. The Company does not hold any variable interest entities.

In May  2005,  the FASB  issued  SFAS No.  154,  "Accounting  Changes  and Error
Corrections."  This  statement  applies to all  voluntary  changes in accounting
principle and requires  retrospective  application  to prior periods  `financial
statements   of  changes  in   accounting   principle,   unless  this  would  be
impracticable.  This statement also makes a distinction  between  "retrospective
application"  of an  accounting  principle  and the  "restatement"  of financial
statements to reflect the  correction of an error.  This  statement is effective
for accounting  changes and corrections of errors made in fiscal years beginning
after  December  15,  2005.  We are  evaluating  the effect the adoption of this
interpretation  will have on its financial  position,  cash flows and results of
operations.

In June 2005,  the EITF reached  consensus on Issue No.  05-6,  Determining  the
Amortization Period for Leasehold Improvements ("EITF 05-6"). EITF 05-6 provides
guidance on  determining  the  amortization  period for  leasehold  improvements
acquired in a business  combination or acquired  subsequent to lease  inception.
The guidance in EITF 05-6 will be applied  prospectively  and is  effective  for
periods  beginning  after June 29,  2005.  EITF 05-6 is not  expected  to have a
material effect on its consolidated financial position or results of operations.

3.       PRINCIPLES OF CONSOLIDATION

The  accompanying  consolidated  financial  statements  include the  accounts of
Harbin Electric,  Inc. (from the merger date), its 100% wholly-owned  subsidiary
Harbin  Tech Full  Electric  Co.,  Ltd.  ("HTFE"),  and Harbin  Baldor Tech Full
Electric Company Limited ("Harbin Baldor"), a joint venture in which the Company
has 65%  interest.  The  remaining 35% interest  represents  minority  interest.
Harbin Baldor has not commenced  operations and HTFI  anticipates  entering into
negotiations  regarding the  termination of the Joint Venture . All  significant



                                       7
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


inter-company  accounts and transactions  have been eliminated in consolidation.
The historical results for the first nine month periods ended September 30, 2005
include  both the  Company  and HTFE while the  historical  results for the nine
month periods ended September 30, 2004 include only HTFE.

4.       MAJOR CUSTOMERS AND VENDORS

Three major  customers  accounted for 72% of the net revenue for the three month
and 68% for the nine month  periods  ended  September  30,  2005;  and two major
customers  accounted  for 67% of the net  revenue  for the three  month and nine
month  periods  ended  September  30,  2004.  At September  30, 2005,  the total
receivable balance due from these three customers was $3,526,085.

Three vendors  provided 80% of the  Company's  purchase of raw materials for the
three month and 73% for the nine month  periods ended  September  30, 2005;  and
three  vendors  provided 55% of the  Company's  purchase of raw material for the
three month and nine month  periods  ended  September  30, 2004.  The  Company's
accounts payable to these vendors was $1,815 at September 30, 2005.

The Company  extends credit to its customers  based upon its assessment of their
credit worthiness and generally does not require collateral.  Credit losses have
not been significant.

5.       INVESTMENT IN MARKETABLE EQUITY SECURITIES

The Company's  investments in marketable securities are classified as "available
for sale" securities, and are carried on the financial statements at fair market
value.  Realized gains and losses are included in earnings,  unrealized  holding
gains and losses are reported as a separate component of stockholders' equity as
a component of "Other Comprehensive  Income." The average cost method is used to
determine cost of securities.

The  following is a summary of the Company's  investment  in  marketable  equity
securities, all of which are classified as available-for-sale  securities, as of
September 30, 2005.  The company had no  marketable  securities at September 30,
2004.

 ------------------- ------------------ --------------------- ----------------
                           Cost         Estimated fair value  Unrealized loss
 ------------------- ------------------ --------------------- ----------------
  Equity securities   $         508,245  $            483,000  $        25,245
 ------------------- ------------------ --------------------- ----------------

6.       INTANGIBLE ASSETS

Intangible  assets consist of Patents.  The Company is amortizing the intangible
assets  over  3  year  period.  The  Company  evaluates  intangible  assets  for
impairment,  at least on an annual  basis and  whenever  events  or  changes  in
circumstances  indicate that the carrying value may not be recoverable  from its
estimated  future  cash  flows.   Recoverability  of  intangible  assets,  other
long-lived assets, and goodwill is measured by comparing their net book value to
the related projected  undiscounted cash flows from these assets,  considering a
number  of  factors  including  past  operating   results,   budgets,   economic
projections, market trends and product development cycles. If the net book value

                                       8
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


of the  asset  exceeds  the  related  undiscounted  cash  flows,  the  asset  is
considered  impaired,  and a second test is  performed  to measure the amount of
impairment  loss. As of September  30, 2005, no impairment of intangible  assets
has been recorded.

Net intangible assets at September 30, 2005 were as follows:


       Patents                                         $      598,152
       Less Accumulated amortization                          (33,881)
                                                       ---------------
                                                       $      564,271
                                                       ===============

Amortization expense for the three month and nine month periods ended September
30, 2005 amounted to $14,924 and $33,881, respectively; and $0 for the three
month and nine month periods ended September 30, 2004.

Amortization  expense for the Company's  current  amortizable  intangible assets
over the next five fiscal years is estimated to be: 2006 -$40,333; 2007-$40,333;
2008-$40,333; 2009 - $40,333; and, 2010 - $40,333.

7.       SHAREHOLDER'S EQUITY

Harbin Tech Full Electric Co. Ltd. ("HTFE") was founded in the People's Republic
of China on April 10, 2003. Upon its inception,  HTFE issued 6,000,000 shares of
its common  stock for  $726,000 to four  shareholders.  On July 12,  2004,  HTFE
issued  47,000,000  shares of its common stock for  subscription  receivable  of
$5,771,842  from a  related  party.  Immediately  after the  issuance,  HTFE had
53,000,000  shares of stock issued and  outstanding.  Through December 31, 2004,
HTFE had subscription  receivable $4,862,256 from its shareholders.  The Company
accrued interest at 5.86% on the subscription  receivable  amounting to $125,859
through  December 31, 2004.  The Company has  completed the process of acquiring
the plant facility in exchange of the  subscription  receivable in the beginning
of year 2005.

On August 31, 2004, all shareholders of HTFE entered into an agreement with Tech
Full  International,  Inc. (TFI) to exchange all of their outstanding  shares of
HTFE for 1,500  shares of common  stock of TFI which  constituted  100% of TFI's
issued and outstanding  shares.  After the  consummation  of the agreement,  the
former shareholders of HTFE owned all outstanding and issued shares of TFI.

On January 12, 2005, TFI and its  shareholders  entered into a merger  agreement
("Merger Agreement") with Torch Executive Services,  Inc. ("Torch") and a wholly
owned subsidiary of Torch, Torch Subsidiary,  Inc. ("TSI"). At the closing which
occurred on January 24, 2005,  TFI was merged with and into TSI and the separate
existence of TFI ceased. On the date of the merger,  there were 7,000,300 shares
of  common  stock  of  Torch  outstanding.  As a part of the  merger,  8,000,000
restricted shares of Torch were issued to the shareholders of TFI and the former
president,  sole director and majority  shareholder of Torch returned  5,000,000
shares of Torch to the  treasury  which was  subsequently  cancelled.  After the
merger, there were 10,000,300 shares of stock of Torch outstanding.

On January 24, 2005 the Company  declared a stock  dividend of one-half share on
each share of its stock  outstanding to all stockholders of record as of January
26, 2005, after the Merger Agreement.  The stock dividend was payable on January
27, 2005. After the stock dividend,  the Company had 15,000,451 shares of common
stock outstanding.  The Company has a total of 15,000,451 shares of common stock
outstanding as of September 30, 2005.

On January 12, 2005,  HTFE entered into an agreement  with related  party Harbin
Tech Full Industry Co., Ltd. ("HTFI"), pursuant to which HTFI agreed to transfer
all of its  interests in joint venture with Baldor  Electric  Company to HTFE in
exchange for the Company to issue 1,000,000  shares of its common stock to HTFI.
On May 12,  2005,  HTFE and the Company  signed a written  Consent  amending the

                                       9
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


Share Transfer Agreement whereby HTFE and the Company agreed that the Company is
to issue 786,885 shares of the Company's common stock for the transfer of HTFE's
interest in the joint venture,  as opposed to the 1,000,000  shares as set forth
in the original  Share  Transfer  Agreement  dated January 12, 2005. The Company
allocated 786,885 shares of its common stock for issuance in connection with the
transfer of the joint venture interest.

On August 31, 2005,  Harbin  Electric,  Inc.  entered  into  certain  Securities
Purchase Agreements with institutional  investors and other accredited investors
to sell an aggregate of 1,600,000  shares of the  Company's  common  stock,  par
value $0.00001, at a price of $3.00 per share together with warrants to purchase
an aggregate of 480,000  shares of common stock at $3.50 per share (the "Private
Placement").  The Private Placement is being entered into pursuant to Regulation
D of the Securities Act of 1933.

On  September  18,  2005,  the  Company  received  $4,800,000  from the  Private
Placement.  The Company's total registered  capital as of September 30, 2005 has
been increased to $11,200,000.

8.   STOCK OPTIONS

In  December  2002,  the FASB issued  SFAS No. 148  "Accounting  for Stock Based
Compensation-Transition  and  Disclosure".  SFAS No.  148 amends  SFAS No.  123,
"Accounting for Stock Based  Compensation",  to provide  alternative  methods of
transition  for a voluntary  change to the fair value based method of accounting
for stock-based employee  compensation.  In addition,  this Statement amends the
disclosure  requirements  of Statement 123 to require  prominent  disclosures in
both annual and interim financial  statements about the method of accounting for
stock based employee compensation and the effect of the method used, on reported
results.  The Statement is effective for the Companies' interim reporting period
ending January 31, 2003.

In compliance with SFAS No. 148, the Company has elected to continue to follow
the intrinsic value method in accounting for its stock-based employee
compensation plan as defined by APB No. 25 and has made the applicable
disclosures below.

Had the Company  determined  employee stock based  compensation  cost based on a
fair value  model at the grant date for its stock  options  under SFAS 123,  the
Company's  net  earnings  per share  would have been  adjusted  to the pro forma
amounts  for nine  month  periods  ended  September  30,  2005 as  follows ($ in
thousands, except per share amounts):

------------------------------------------------------- ------------------------
                                                        Nine month period ended
                                                        September 30, 2005
------------------------------------------------------- ------------------------
Net Income - as reported                                $                 7,284

------------------------------------------------------- ------------------------
Stock-Based employee compensation expense included in
reported net income, net of tax
------------------------------------------------------- ------------------------
Total stock-based employee compensation under                              (186)
fair-value-based method for all rewards, net of tax
------------------------------------------------------- ------------------------

Pro forma net income                                    $                 7,098
------------------------------------------------------- ------------------------

On January 31, 2005,  the Company  granted a total of 150,000  stock  options to
purchase  shares of its common stock to three directors of the Company under the
Company's  2005  Stock  Option  Plan,  pursuant  to  a  written  agreement  (the
"Agreement").  The option  terminates five (5) years from the date of grant. Per
the  Agreement,  option shall become  exercisable  during the term that Optionee
serves as a Director of the  Company as follows:  (i) 50% of the shares of Stock

                                       10
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


subject to this Option  became  exercisable  immediately  as of the date of this
Agreement;  and (ii) the  balance of the shares of Stock  subject to this Option
shall become  exercisable  in eight (8) equal  quarterly  installments  of three
thousand one hundred twenty five (3,125) shares of Stock subject to this Option,
the first  installment to be exercisable as of the last day of the first quarter
of  calendar  year  2005,  with an  additional  3,125  of such  Shares  becoming
exercisable as of the last day of each subsequent  quarter.  The Company granted
to Optionee the right to purchase the number of shares of Stock set forth in the
Agreement,  for cash (or other consideration as is authorized under the Plan and
acceptable to the Board of Directors of the Company,  in their sole and absolute
discretion) at $3.10 per share (the "Exercise Price"), such price being not less
than eighty-five  percent (85%) of the fair market value per share of the Shares
covered by this Option as of the date of the Agreement.

On September 26, 2005, the Company  granted  options (the "Options") to purchase
250,000 shares of the Company's common stock (the "Common Stock") at an exercise
price $3.93,  the closing  price on September 23, 2005.  One-fifth  (1/5) of the
Options  (50,000  shares) has vested  immediately  upon granting.  The remaining
Options shall vest over a 3-year period, with 13.33 % (33,333 shares) vesting on
the 180th day from September 26, 2005, and the balance  vesting  thereafter on a
semi-annual  basis,  proportionately  over the course of the following three (3)
years.

9.   SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

The Company  prepares its statements of cash flows using the indirect  method as
defined under the Financial  Accounting Standard No. 95. Cash from investing and
financing  activities exclude the effect of the acquisition of 65% interest in a
joint venture from an entity related through common ownership.

The Company paid $0 for interest and income tax during the nine month periods
ended September 30, 2005 and 2004.

10.      STATUTORY COMMON WELFARE FUND

As  stipulated by the Company Law of the People's  Republic of China (PRC),  net
income after taxation can only be distributed as dividends  after  appropriation
has been made for the following:

     (i)  Making up cumulative prior years' losses, if any;

     (ii) Allocations  to the  "Statutory  surplus  reserve"  of at least 10% of
          income  after  tax,  as  determined  under  PRC  accounting  rules and
          regulations, until the fund amounts to 50% of the Company's registered
          capital;

     (iii) Allocations  of 5-10% of income  after tax, as  determined  under PRC
          accounting rules and regulations,  to the Company's  "Statutory common
          welfare  fund",  which is  established  for the  purpose of  providing
          employee  facilities  and other  collective  benefits to the Company's
          employees; and

     (iv) Allocations to the discretionary  surplus reserve,  if approved in the
          shareholders' general meeting.

                                       11
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


The  Company  established  a reserve  for the annual  contribution  of 5% of net
income to the welfare fund. The amount included in the statutory reserve for the
nine month  periods  ended  September 30, 2005 and 2004 amounted to $479,597 and
$50,053, respectively.

11.  STATUTORY RESERVE

In accordance  with the Chinese Company Law (note 10), the Company has allocated
10% of its annual net income,  amounting to $959,194 and $100,105,  as statutory
reserve  for  the  nine  month  periods  ended  September  30,  2005  and  2004,
respectively.  The Statutory  Surplus Reserve and Statutory  common welfare fund
are aggregated on the balance sheet as Statutory Reserve.

12. EMPLOYEE PENSION

The employee pension in Harbin  generally  includes two parts. The first part to
be paid by the company is 20% of the employees' actual salary in the prior year.
If the average  salary  falls below $1,165 for each  individual,  $1,165 will be
used as the basis.  The other part paid by the  employees is 8% of actual salary
with the same minimum  requirement.  The Company made $13,648  contributions  of
employment benefits, including pension in the nine month periods ended September
30, 2005. The Company made no  contributions of employment  benefits,  including
pension in the nine month periods ended September 30, 2004.

13.  EARNINGS PER SHARE

Earnings per share for nine month periods ended September 30, 2005 and September
30, 2004 were  determined by dividing net income for the periods by the weighted
average number of both basic and diluted shares of common stock and common stock
equivalents outstanding.

The  following  is an  analysis  of the  differences  between  basic and diluted
earnings per common share in accordance  with Statement of Financial  Accounting
Standards No. 128, "Earnings Per Share".
<TABLE>
<CAPTION>

-------------------------------------------- ------------------------------------- ----------------------------------
                                                       For the nine month                For the three month
                                                    periods ended Sept. 30             periods ended Sept. 30
-------------------------------------------- ------------------- ----------------- ---------------- -----------------
                                                     2005               2004             2005              2004
-------------------------------------------- ------------------- ----------------- ---------------- -----------------
<S>                                                  <C>                <C>             <C>                <C>
Weighted average common shares outstanding           14,929,350         8,000,000       15,539,580         8,000,000
-------------------------------------------- ------------------- ----------------- ---------------- -----------------
Effect of dilutive securities:                           12,845                             14.432
Stock options
-------------------------------------------- ------------------- ----------------- ---------------- -----------------
Weighted average common shares                       14,942,195         8,000,000       15,554,012         8,000,000
outstanding and common share equivalents
-------------------------------------------- ------------------- ----------------- ---------------- -----------------
</TABLE>


14.      MERGER AGREEMENT

On January  12,  2004,  Torch  Executive  Services  Ltd.,  a Nevada  corporation
("Torch"),  entered into an Agreement  and Plan of Merger  ("Merger  Agreement")
with Torch  Subsidiary,  Inc., a Delaware  corporation  ("TSI")  wholly-owned by
Torch, Tech Full  International,  Inc., a Delaware  corporation  ("TFI") and the
shareholders  of TFI.  TFI had  one  100%  wholly-owned  subsidiary  in  Nangang
District, Harbin of Heilongjiang Province, China, Harbin Tech Full Electric Co.,
Ltd.  ("HTFE").  Under the terms of the agreement,  TFI merged with and into TSI
and Torch issued  8,000,000  million  shares of its common  stock  ("Acquisition

                                       12
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


Shares") to the holders of TFI and, in  consideration  of the payment of $5,000,
the former president of Torch returned  5,000,000 million shares of common stock
to the treasury which was  subsequently  cancelled.  The new shares  constituted
approximately 80 percent of the outstanding  shares of Torch,  after the merger.
The Merger Agreement was closed on January 24, 2004.

At  closing,  Frank  Torchia  was  replaced as  president,  principal  executive
officer,  treasurer,  principal accounting officer, principal financial officer,
and secretary and the officers of TFI have been  appointed as officers of Torch.
Further,  at the closing of the transaction,  the existing president resigned as
Torch's sole  director  and officers of TFI have been  appointed to the board of
directors of Torch.

At the effective date of merger, by virtue of the merger and without any action
on the part of TSI, TFI or the TFI shareholders, the shares of capital stock of
each of TFI and TSI should have been converted as follows:

a) Capital  Stock of TSI.  Each issued and  outstanding  share of TSI's  capital
stock continued to be issued and outstanding and was converted into one share of
validly  issued,  fully  paid,  and  non-assessable  common  stock of TSI, as it
existed  from and after  closing.  Each stock  certificate  of TSI's  evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the TSI, as it existed from and after closing.

b) Conversion of TFI. Each share issued and  outstanding  of TFI that was issued
and outstanding at the effective date of the merger was automatically  cancelled
and  extinguished  and  converted,  without any action on the part of the holder
thereof,  into the right to receive at the time and in the amounts  described in
the Merger  Agreement  an amount of  Acquisition  Shares  equal to the number of
Acquisition Shares divided by the number of TFI shares  outstanding  immediately
prior to  closing.  All such  TFI  shares,  when so  converted,  were no  longer
outstanding  and were  automatically  cancelled and retired and ceased to exist,
and each holder of a certificate representing any such shares ceased to have any
rights with respect thereto,  except the right to receive the Acquisition Shares
paid in  consideration  therefore  upon the  surrender  of such  certificate  in
accordance with the merger agreement.

On January 26,  2005,  Torch  changed  its name to Harbin  Electric,  Inc.  (the
"Company")  and TSI  merged  with and into the  Company,  with  Harbin  Electric
remaining as the surviving corporation. On January 26, 2005 the Company declared
a stock dividend of one-half share on each share of its stock outstanding to all
stockholders of record as of January 26, 2005, after the merger  agreement.  The
stock dividend was payable on January 27, 2005.

15.  RELATED PARTY TRANSACTION

On January 12, 2005,  HTFE entered into a Share  Exchange  Agreement  with HTFI,
pursuant  to which  HTFI  agreed to  transfer  all of its  interests  in a joint
venture with Baldor  Electric  Company  ("Baldor")  to HTFE. In exchange for the
transfer  of the  interests  in the  joint  venture,  HTFE  agreed  to cause its
publicly traded holding company to issue 1,000,000 shares of its common stock to
HTFI as a payment for the transfer of the joint  venture  interests.  On May 11,
2005, HTFE and the Company signed a written Consent  amending the Share Transfer
Agreement   whereby  HTFE  and  the  Company  agreed  that  the  Company  is  to
issue786,885  shares of the  Company's  common  stock for the transfer of HTFE's
interest in the joint venture,  as opposed to the 1,000,000  shares as set forth
in the original  Share  Transfer  Agreement  dated  January 12, 2005.  The Chief
Executive  Officer  and  Chairman  of the  Company  and the  Company's  majority
shareholder is also the principal  owner of HTFI. The joint ventures assets were
recorded at historical cost.

                                       13
<PAGE>
                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2005
                                   (Unaudited)


16.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC's economy.

The Company's  operations in the PRC are subject to specific  considerations and
significant  risks not typically  associated with companies in the North America
and Western  Europe.  These include risks  associated  with,  among others,  the
political,  economic and legal environments and foreign currency  exchange.  The
Company's results may be adversely affected by changes in governmental  policies
with  respect  to laws and  regulations,  anti-inflationary  measures,  currency
conversion and remittance abroad, and rates and methods of taxation, among other
things.

The  future  profitability  of the  Company  is  dependent  upon  the  Company's
abilities  to purchase  the raw  material at the current  rate and  maintain the
operating expense at the current level.

17.      RECLASSIFICATIONS

Certain prior period amounts have been reclassified to conform to the nine month
periods ended September 30, 2005 presentation.


                                       14
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation
                                                    19
Item 2.  Management's Discussion and Analysis or Plan of Operation

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

The  following  discussion  should  be read in  conjunction  with the  unaudited
condensed  consolidated financial statements and notes thereto set forth in Item
1 of  this  Quarterly  Report.  In  addition  to  historical  information,  this
discussion  and  analysis  contains  forward-looking  statements  that relate to
future  events  and  expectations  and,  as  such,  constitute   forward-looking
statements.  Forward-looking  statements include those containing such words as"
anticipates,"  "believes," "estimates," "expects," "hopes," "targets," "should,"
will,"  "will  likely  result,"  "forecast,"  "outlook,"  "projects"  or similar
expressions.  Such  forward-looking  statements involve known and unknown risks,
uncertainties  and other factors that may cause actual  results,  performance or
achievements  of the Company to be materially  different from those expressed or
implied in the forward-looking statements.

Overview

We are incorporated  under the laws of the state of Nevada and are headquartered
in Harbin,  China  along with our  wholly-owned  subsidiaries.  We  manufacture,
design, supply and service linear motors ("LMs") and special electric motors for
domestic China and other international  markets.  LMs in concept perform similar
functions to rotary motors, but differ because LMs are flat in structure and can
be configured  into a number of forms.  LMs also use the  principles of magnetic
properties to induce  linear forces that range in power  suitable for many types
of applications.  We have domestic  patents for commercial  applications of LMs.
Our LMs  represent an  improvement  over  traditional  electric  motors based on
design,  energy  output,  energy  efficiency  and precision  movement.  Industry
segments   served  include  oil  services,   factory   automation,   automotive,
construction  machinery,  packaging,  and mass  transportation  systems.  Harbin
Electric  has  160  employees   with   approximately   200,000  square  feet  of
state-of-the-art manufacturing space.

Significant Accounting Policies

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting  principles requires us to make estimates and assumptions that affect
the reported  amounts of assets and  liabilities  and  disclosure  of contingent
assets and liabilities at the date of the financial  statements and the reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those estimates.

Accounts Receivable

We maintain  reserves for  potential  credit losses on accounts  receivable.  We
review the composition of accounts  receivable and analyze historical bad debts,
customer concentrations, customer credit worthiness, current economic trends and
changes in customer payment patterns to evaluate the adequacy of these reserves.
Reserves are recorded primarily on a specific identification basis.

Inventories

Inventories  are valued at the lower of cost  (determined on a weighted  average
basis) or market.  We compare the cost of inventories  with the market value and
allowance is made for writing down the  inventories  to their market  value,  if
lower.

                                       15
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation


Property & Equipment

Property and  equipment are stated at cost.  Expenditures  for  maintenance  and
repairs are charged to earnings as incurred; additions, renewals and betterments
are capitalized.  When property and equipment are retired or otherwise  disposed
of,  the  related  cost  and  accumulated  depreciation  are  removed  from  the
respective accounts, and any gain or loss is included in operations.

Depreciation  of property  and  equipment  is provided  using the  straight-line
method  for  substantially  all  assets  with  estimated  lives of: 30 years for
building,  10 years for machinery,  and 5 years for office equipment and 8 years
for vehicles.

Intangible Assets

Intangible  assets  consist  of  patents.  We  evaluate  intangible  assets  for
impairment,  at least on an annual  basis and  whenever  events  or  changes  in
circumstances  indicate that the carrying value may not be recoverable  from its
estimated  future  cash  flows.   Recoverability  of  intangible  assets,  other
long-lived assets and, goodwill is measured by comparing their net book value to
the related projected  undiscounted cash flows from these assets,  considering a
number  of  factors  including  past  operating   results,   budgets,   economic
projections, market trends and product development cycles. If the net book value
of the  asset  exceeds  the  related  undiscounted  cash  flows,  the  asset  is
considered  impaired,  and a second test is  performed  to measure the amount of
impairment  loss.  Potential  impairment of goodwill after July 1, 2002 is being
evaluated in accordance with SFAS No. 142.

Revenue Recognition

Our  revenue  recognition  policies  are in  compliance  with  Staff  Accounting
Bulletin  (SAB) 101.  Sales  revenue is  recognized  at the date of  shipment to
customers when a formal arrangement  exists, the price is fixed or determinable,
the delivery is  completed,  no other  significant  obligations  by us exist and
collectibility  is  reasonably  assured.  Payments  received  before  all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue.

Stock based Compensation

In October  1995,  the FASB  issued SFAS No.  123,  "Accounting  for Stock Based
Compensation."  SFAS No. 123 prescribes  accounting and reporting  standards for
all stock based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting  Principles
Board Opinion No. 25,  "Accounting  for Stock Issued to Employees"  (APB 25) and
related  interpretations  with  pro  forma  disclosure  of what net  income  and
earnings per share would have been had we adopted the new fair value method.  We
use the  intrinsic  value  method  prescribed  by APB 25 and have  opted for the
disclosure provisions of SFAS No. 123.On January 31, 2005, the Company granted a
total of 150,000 stock  options to purchase  shares of its common stock to three
directors of the Company under the Company's 2005 Stock Option Plan, pursuant to
a written  agreement  (the "Award  Agreement").  The options  terminate five (5)
years from the date of the grant.  Pursuant to the Award Agreement,  the Options
shall become  exercisable during the term that the optionee serves as a Director
of the  Company,  as  follows:  (i) 50% of the  shares of stock  subject to this
option became exercisable immediately as of the date of the Award Agreement; and
(ii) the  balance of the shares of stock  subject to this  option  shall  become
exercisable  in eight (8) equal  quarterly  installments,  of 3,125  shares  per
installment,  the first  installment to be exercisable as of the last day of the
first  quarter of calendar year 2005,  with an  additional  3,125 of such Shares
becoming  exercisable as of the last day of each subsequent quarter. The Company
granted the three  directors the right to purchase the number of shares of stock
set  forth  in the  Award  Agreement,  for cash (or  other  consideration  as is
authorized  under  the Plan and  acceptable  to the  Board of  Directors  of the

                                       16
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation


Company,  in their  sole and  absolute  discretion)  at $3.10  per  share  (the"
Exercise  Price"),  such  Exercise  Price  being the high price per share of the
Company's  common stock  reported on the NASD  Over-The-Counter  Bulletin  Board
under HRBN.OB on January 31, 2005.

Income Taxes

We utilize  SFAS No. 109,  "Accounting  for Income  Taxes,"  which  requires the
recognition of deferred tax assets and  liabilities  for the expected future tax
consequences  of events that have been included in the  financial  statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences  between the tax bases of assets and
liabilities  and their financial  reporting  amounts at each period end based on
enacted tax laws and statutory tax rates  applicable to the periods in which the
differences  are expected to affect  taxable  income.  Valuation  allowances are
established,  when  necessary,  to reduce  deferred  tax  assets  to the  amount
expected  to be  realized.  According  to  the  Provisional  Regulations  of the
People's  Republic  of China on Income  Tax,  the  Document  of  Reductions  and
Exemptions  of Income Tax for us have been  approved by the local tax bureau and
the Management Regulation of Harbin Economic and Technological Development Zone.
We are exempted from income tax from July 1, 2004 through June 30, 2006.

Foreign Currency Transactions and Comprehensive Income (Loss)

Accounting principles generally require that recognized revenue, expenses, gains
and losses be included in net income. Certain statements, however, require
entities to report specific changes in assets and liabilities, such as gain or
loss on foreign currency translation, as a separate component of the equity
section of the balance sheet. Such items, along with net income, are components
of comprehensive income. Our transactions occur in Chinese Renminbi. The unit of
Renminbi is in Yuan.

Recent Accounting Pronouncements

On May 15 2003, the FASB issued FASB Statement No. 150 ("SFAS 150"), "Accounting
for Certain Financial  Instruments with  Characteristics of both Liabilities and
Equity." SFAS 150 changes the accounting for certain financial instruments that,
under previous guidance, could be classified as equity or "mezzanine" equity, by
now requiring  those  instruments to be classified as liabilities  (or assets in
some  circumstances) in the statement of financial position.  Further,  SFAS 150
requires  disclosure  regarding the terms of those  instruments  and  settlement
alternatives.  SFAS 150  affects an  entity's  classification  of the  following
freestanding  instruments:  (a) Mandatory  redeemable  instruments (b) Financial
instruments  to  repurchase  an entity's own equity  instruments  (c)  Financial
instruments embodying obligations that the issuer must or could choose to settle
by issuing a variable  number of its shares or other  equity  instruments  based
solely on (i) a fixed monetary amount known at inception or (ii) something other
than  changes in its own equity  instruments  and (d) SFAS 150 does not apply to
features  embedded in a financial  instrument  that is not a  derivative  in its
entirety.  The guidance in SFAS 150 is  generally  effective  for all  financial
instruments  entered  into or  modified  after May 31,  2003,  and is  otherwise
effective at the beginning of the first interim period  beginning after June 15,
2003. For private  companies,  mandatory  redeemable  financial  instruments are
subject to the  provisions  of SFAS 150 for the fiscal  period  beginning  after
December 15,  2003.  The Company does not expect the adoption of SFAS No. 150 to
have a material  impact on its  financial  position or results of  operations or
cash flows.

In December  2003,  the  Financial  Accounting  Standards  Board (FASB) issued a
revised  Interpretation  No. 46,  "Consolidation of Variable Interest  Entities"
(FIN 46R). FIN 46R addresses  consolidation by business  enterprises of variable
interest  entities and significantly  changes the  consolidation  application of
consolidation   policies  to  variable  interest  entities  and,  thus  improves
comparability  between  enterprises  engaged  in similar  activities  when those
activities are conducted  through variable interest  entities.  The Company does
not hold any variable interest entities.

                                       17
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation


Nine Months Ended September 30, 2005 Compared To Nine Months Ended September 30,
2004

Revenue

For the nine month period ended September 30, 2005, we generated net revenues of
$16,446,753. During the nine month period ended September 30, 2004, we produced
net revenues of $1,790,549. This was the first quarter of production revenues as
the initial production launch occurred in the end of June 2004.

As of September 30, 2005, all operational revenues of the company have come from
HTFE and all operational  revenues rely on the  proprietary  technology and core
patents of HTFE. The Harbin Baldor Joint  Venture,  in which interest is held by
HTFE,  remains in the developmental  stage has not generated any revenue through
September 30, 2005.

Gross Profit

The Company  achieved a gross  profit of  $8,183,402  for the nine months  ended
September  30, 2005.  During the nine month period ended  September 30, 2004, we
had gross profit of $1,133,260. This was the first quarter of production profits
as the initial production launch occurred in the end of June 2004. Gross margin,
as a percentage  of revenues,  was 50% for the nine months ended  September  30,
2005.

Operating Expenses

The Company  incurred  operating  expenses of $921,843 for the nine months ended
September  30, 2005,  an increase of $779,268  compared to $142,575 for the nine
months  ended  September  30,  2004.  This  increase is a direct  result of full
operation  of the  Company  during  the nine  month  period of 2005 and only one
quarter of revenues during the nine months ended September 30, 2004.  Aggregated
selling  expenses of $225,256  account for expenses  related to costs associated
with sales and marketing of the Company's  products.  Operating expenses include
general and administrative  expenses of $696,587 for nine months ended September
30,  2005  and  relate  to the cost of  maintaining  the  company's  facilities,
salaries and research and development.

Net Income

The Company's net income was $7,284,487 for the nine months ended  September 30,
2005,  compared to income of $1,001,055 for the nine months ended  September 30,
2004.  The increase is  attributed  to  production  profits  generated  from the
initial production launch at the end of June 2004.

Liquidity and Capital Resources

As of September 30, 2005, the Company had $5,604,096 cash and cash  equivalents,
and we believe  that current  cash needs can be met from  working  capital.  The
Company had net cash flows provided by operations of $883,144 for the nine month
period ended  September  30, 2005,  as compared to net cash from  operations  of
$298,915 in the  corresponding  nine month  period last year.  The change in net
cash  flows  from   operations  in  the  current   period  as  compared  to  the
corresponding  period  last  year  was  mainly  due to the  initiation  of  full
operations  in the  end of June  2004.  Cash  flows  from  investing  activities
resulted in net usage of $2,374,371 in the current period as compared  $6,714 in
the  corresponding  nine month period last year. The usage in the current period
was  mainly  due to  investments  in  patents  and  technology  in the amount of

                                       18
<PAGE>

                     HARBIN ELECTRIC, INC. AND SUBSIDIARIES
            Management's Discussion and Analysis or Plan of Operation

$266,200,  and property and  equipment  of  $2,108,171  in the nine month period
ended  September  30,  2005.  The  Company  had a net  increase in cash and cash
equivalent of $3,393,293 in the current  period as compared to a net increase of
$737,879 in the corresponding period last year.

On September 18, 2005, the Company received  $4,800,000 from a private placement
through  the sale of  1,600,000  shares  to  institutional  investors  and other
accredited investors.  The Company intends to use the proceeds from the sale for
general  corporate  purposes,   including  but  not  limited  to,  expansion  of
production  capacity,  research  and  development,   certification  of  our  new
products, and other general working capital needs.

The majority of the Company's  revenues and expenses were denominated  primarily
in Renminbi ("RMB"), the currency of the People's Republic of China. There is no
assurance  that exchange  rates between the RMB and the U.S.  dollar will remain
stable.  A revaluation  of the RMB relative to the U.S.  dollar could  adversely
affect our business,  financial  condition and results of operations.  We do not
engage in currency hedging, therefore inflation has not had a material impact on
our business.


                                       19
<PAGE>

Item 3.  Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.

The Company's Chief Executive  Officer and Chief Financial  Officer conducted an
evaluation  of the  effectiveness  of the design and  operation of the Company's
disclosure controls and procedures as defined in Securities Exchange Act of 1934
Rule  13a-15(e),  as of the end of the period  covered by this report.  Based on
that  evaluation,  the  Chief  Executive  Officer  and Chief  Financial  Officer
concluded that the Company's  disclosure  controls and procedures were effective
as of the end of the period covered by this report.

(b) Changes in Internal Control over Financial Reporting.

There  were no  changes in  internal  controls  over  financial  reporting  that
occurred during the second quarter of 2005 that have materially affected, or are
reasonably  likely to materially  affect,  the Company's  internal  control over
financial reporting.



                           PART II. OTHER INFORMATION




Item 6.  Exhibits.


                    31.1      Certification  by  the  Chief  Executive   Officer
                              pursuant to Rule 13a-14(a) or 15d-14(a)

                    31.2      Certification  by  the  Chief  Financial   Officer
                              pursuant to Rule 13a-14(a) or 15d-14(a)

                    32.1      Certification  of the Chief Executive  Officer and
                              the Chief  Financial  Officer  pursuant  18 U.S.C.
                              Section 1350,  as adopted  pursuant to Section 906
                              of the Sarbanes-Oxley Act of 2002

                                       20
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                            Harbin Electric, Inc.




Date:  November 18, 2005                   By:  /s/ Tian Fu Yang
                                            ------------------------
                                            Tianfu Yang
                                            Chief Executive Officer



Date:  November 18, 2005                   By:  /s/ Zedong Xu
                                            ----------------------
                                            Zedong Xu
                                            Chief Financial Officer



                                       21
<PAGE>



                                  EXHIBIT INDEX
(a) Exhibits:

<TABLE>
<CAPTION>

Exhibit
Number     Description                                           Method of Filing
---------- ----------------------------------------------        ------------------------------
<C>                           <C>                                            <C>
31.1       Certification by the Chief Executive Officer          Filed herewith as Exhibit 31.1
           pursuant to Rule 13a-14(a) or 15d-14(a)
31.2       Certification by the Chief Financial Officer          Filed herewith as Exhibit 31.2
           pursuant to Rule 13a-14(a) or 15d-14(a)
32.1       Certification of the Chief Executive Officer          Filed herewith as Exhibit 32.1
           and the Chief Financial Officer pursuant 18
           U.S.C. Section 1350, as adopted pursuant to
           Section 906 of the Sarbanes-Oxley Act of 2002

</TABLE>

(b) Reports on Form 8-K during the quarter ended September 30, 2005:

     (i) Form  8-K  filed on  October  12,  2005  disclosing  that the  Board of
Directors of the Company has elected Barry Raeburn as Executive  Vice  President
of Finance and Corporate Development.

     (ii) Form 8-K filed on August 31 disclosing  the private  placement to sell
an aggregate of  1,600,000  shares of the  Company's  common  stock,  along with
warrants  to  purchase  an  aggregate  of  480,000  shares of common  stock,  to
institutional investors and other accredited investors.

     (iii)  Form 8-K  filed  on July 7,  2005  disclosing  an  amendment  to the
Company's Bylaws.


                                       22